Despite announcing a record-smashing budget surplus of nearly $100 billion on Friday, California Gov. Gavin Newsom's plan to spend that money would likely push the state toward a 'fiscal cliff' next year, a state analyst said Monday.
SACRAMENTO - Despite announcing a record-smashing budget surplus of nearly $100 billion on Friday, California Gov. Gavin Newsom's plan to spend that money would likely push the state toward a"fiscal cliff" next year that could require billions of dollars in budget cuts, a state analyst said Monday.
The LAO"strongly" urged lawmakers to put more money into savings than Newsom had suggested. They also recommended rejecting some of his budget proposals to keep the state beneath the spending limit this year. California's potential budget problems are the result of a unique California law that limits how lawmakers can spend money above a certain limit, known as the"Gann Limit" after conservative political activist Paul Gann who helped convince voters to approve it in 1979.
The limit this year is $136 billion. California has $252 billion in revenue impacted by the limit. Newsom's budget proposal spends $113 billion on things excluded from the limit - including a $5.5 billion tax cut for businesses, $39 billion of the state's surplus for transportation and environmental projects and $11.5 billion in rebates to taxpayers who own cars.The law gives Newsom and the Legislature two years to figure out how to get under the limit.
Democrats in the state Senate have proposed a constitutional amendment to"harmonize and modernize" the Gann limit"to ensure core programs like health care, higher education, and public safety can continue to be funded and not artificially constrained by the out-of-date Gann Limit."
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